Antitrust & Competition Policy Blog

European Networking and Training for National Competition Enforcers ENTraNCE for Judges 2019 Selected Case Notes

European Networking and Training for National Competition Enforcers ENTraNCE for Judges 2019 Selected Case Notes

 

Pier Luigi Parcu

European University Institute - Robert Schuman Centre for Advanced Studies (RSCAS); Florence School of Regulation - Communications and Media Area

Giorgio Monti

Abstract

This working paper includes a collection of case notes written by those national judges who attended the European Networking and Training for National Competition Enforcers (ENTraNCE Judges 2019). The training programme was organised by RSCAS between November 2018 and October 2019, with the financial contribution of the DG Competition of the European Commission. The case notes included in the working paper summarise judgments from different EU Member States that relate to diverse aspects of competition law enforcement. The working paper thus aims to increase understanding of the challenges that are faced by the national judiciaries in enforcing national and EU competition in the context of the decentralised regime of competition law enforcement that was introduced by Reg. 1/2003.

Can AI Replace the FTC?

Can AI Replace the FTC?

Giovanna Massarotto

UCL Centre for Blockchain Technologies (UCL CBT); University of Iowa - Henry B. Tippie College of Business

Ashwin Ittoo

University of Liège - HEC Management School

Abstract

The application of AI and Machine Learning (ML) techniques is becoming a primary issue of investigation in the legal and regulatory domain. Antitrust agencies are into the spotlight because antitrust is the first arm of government regulation by tackling forms of monopoly and collusive practices in any markets, including new digital-data-driven markets. A question the antitrust community is asking is whether antitrust agencies are equipped with the appropriate tools and powers to face today’s increasingly dynamic markets. Our study aims to tackle this question by building and testing an ML antitrust algorithm (AML) based on an unsupervised approach, devoid of any human intervention. It shows how a relatively simple algorithm can, in an autonomous manner, discover underlying patterns from past antitrust cases classified by commuting similarity. Thus, we recognize that teaching antitrust to an algorithm is possible, although we admit that AI cannot replace antitrust agencies, such as the FTC. Today, having an increasingly fast and uniform way to enforce antitrust principles is fundamental as we move into a new digital economic transformation. Our contribution aims to pave the way for future AI applications in markets’ regulation starting from antitrust regulation. Government’s adoption of emerging technologies, such as AI, appears to be the key for ensuring consumer welfare and market efficiency in the age of AI and big data.

Unlocking Antitrust: Acquisitions of Nascent Firms

Sean Heather of the US Chamber has written Unlocking Antitrust: Acquisitions of Nascent Firms.

Collusion in Quality-Segmented Markets

Collusion in Quality-Segmented Markets

 

Iwan Bos

Maastricht University

Marco A. Marini

University of Rome La Sapienza; CREI, University Rome III

Abstract

This paper analyzes price collusion in a repeated game with two submarkets; a standard and a premium quality segment. Within this setting, we study four types of price-fixing agreement: (i) a segment-wide cartel in the premium submarket only, (ii) a segment-wide cartel in the standard submarket only, (iii) two segment-wide cartels, and (iv) an industry-wide cartel. We present a complete characterization of the collusive pricing equilibrium and examine the corresponding effect on market shares and welfare. Partial cartels operating in a sufficiently large segment lose market share and the industry-wide cartel prefers to maintain market shares at pre-collusive levels. The impact on consumer and social welfare critically depends on the cost of producing quality. Moreover, given that there is a cartel, more collusion can be bene…cial for society as a whole.

Some Reactions to “Reactionary Antitrust”

Some Reactions to “Reactionary Antitrust”

 

Seth B. Sacher

John M. Yun

George Mason University - Antonin Scalia Law School, Faculty

Abstract

In a recent article, Professor John Newman describes and offers a defense of neo-antitrust, and critiques the position taken by those defending modern antitrust. Professor Newman distinguishes between what he sees as merely “conservative” responses—those opposed to the neo-antitrust policy positions, but not opposed to debating the issues they raise—and certain ideas that are “lightly derogatory” and exhibit “logical fallacies.” He proposes the provocative moniker “reactionary antitrust” to designate ideas that fall under this latter rubric.

In this article, we respond to Professor Newman’s critiques of the arguments made by critics of neo-antitrust. Broadly, his claim is that the critics are committing a number of logical fallacies; setting up and knocking down straw men; mistakenly calling their own position in the antitrust debate “apolitical”; and ignoring certain key arguments.

European Commission Merger Control Under Council Regulation No. 139/2004: Mapping The Most Expansive Acquirers In Merger And Acquisition Transactions In 2004–2015

European Commission Merger Control Under Council Regulation No. 139/2004: Mapping The Most Expansive Acquirers In Merger And Acquisition Transactions In 2004–2015

Dzmitry Bartalevich

 

 

Abstract

In EU merger control, the European Commission is empowered by Council Regulation (EC) No. 139/2004 to regulate changes in market structure by deciding whether two or more firms may merge, combine, or consolidate their businesses into one. These decisions affect various market players, including major EU and non-EU businesses, as well as vast product and geographic markets. Offering a network perspective on the cleared merger and acquisition transactions in Phase I decisions under Article 6(1)(b) of Council Regulation (EC) No. 139/2004 (20 January 2004–01 July 2015), this article aims to investigate the overall composition of mergers and acquisitions in terms of their industry sectors and domiciles and to identify the types of firms that acquire more targets than other firms (that is, more expansive firms). The analysis is conducted by using data from the European Commission (601 transactions) and Bureau van Dijk (992 transactions).

Unintended Consequences: Abolishing the Direct Purchaser Rule as a Threat to Private Antitrust Enforcement

Unintended Consequences: Abolishing the Direct Purchaser Rule as a Threat to Private Antitrust Enforcement

Joshua P. Davis

University of San Francisco - School of Law

Anupama Reddy

Abstract

Proposals to abandon the direct purchaser rule under federal antitrust law—and to allow indirect purchasers to bring claims for damages—sound as if they would enhance private antitrust enforcement. That presumably is why they have been attractive to some progressives. After all, expanding who may sue could only increase recoveries, promoting the goals of compensation and deterrence, right? Wrong. Enter the rule of unintended consequences. What is easily missed is that federal class certification doctrine has become entwined with the direct purchaser rule. Overturning Illinois Brick—allowing indirect purchasers to sue for damages under federal law—could well overturn Hanover Shoe—permitting a pass-on defense. Courts have imposed standards to certify a class that are strict and often might not be met without Hanover Shoe. As a result, repealing the direct purchaser rule could make certifying direct purchaser classes much harder, on the whole undermining private enforcement of antitrust laws.

On the Risk of Using a Firm-Level Approach to Identify Relevant Markets

On the Risk of Using a Firm-Level Approach to Identify Relevant Markets

Timo Autio

Jorge Padilla

Compass Lexecon

Salvatore Piccolo

University of Bergamo, Compass Lexecon and CSEF

Pekka Sääskilahti

Compass Lexecon

Lotta Väänänen

University of Mannheim - School of Economics (VWL); Aalto University - Department of Economics

Abstract

In a recent influential paper Coate et al. (2020) have criticized the standard firm-level approach to market definition in merger review. They argue why a market-level approach to critical loss is more appropriate than a firm-level critical loss analysis. Their conclusion is that under certain plausible demand scenarios --- i.e., non-linearity of demand functions --- a diversion-based firm-level analysis could easily reach the wrong answer on market definition. We extend their analysis by showing that in standard environments used by the most recent theoretical and empirical academic work on merger analysis (namely CES and logit demand functions), a firm level approach actually leads to an excessively narrow market definition as opposed to a market-level approach, thereby increasing the risk of type I errors.

Quality and Imperfect Competition

Quality and Imperfect Competition

Germain Gaudin

University of Freiburg - College of Economics and Behavioral Sciences; Télécom Paris

Abstract

We provide a framework of analysis for models of imperfect competition when firms compete in quality as well as in another instrument (either price or quantity). The equilibrium can notably be characterized through a quality parameter, which depends on firms' diversion ratios. Extending the monopoly analysis of Spence (1975), we find that, together with the change in the marginal value of quality as the absolute willingness-to-pay falls, our quality parameter is the key determinant of quality distortions under imperfect competition. We also use our framework to analyze the effects of technology shocks and commodity taxes, as well as horizontal mergers. Our approach encompasses several standard models of imperfect competition, and we provide various extensions to our baseline model.

Platforms & Digital Markets Regulation: In Search of New Principles - Now available on youtube

Platforms & Digital Markets Regulation: In Search of New Principles. 

 

 

The EU Commission has just released its new Digital Markets Act for regulating platforms. On December 4th at the DMC Forum Copenhagen Business School we discussed what principles shall we adopt to promote competition in digital markets while preserving the value creation of the platform business model. Here’s the full video of the event.

Keynote by Jacques Cremer (minute 09) and Pierre Regibeau, EU chief competition economist (minute 1:09:52).

Panel A - promoting market contestability (minute 29:19) with
Marco Iansiti Hanna Halaburda Feng Zhu Daniel Sokol

Panel B - data value creation practices (minute 1:29:48) with
Youngjin Yoo Panos Constantinides Jannis Kallinikos Ulrike Schultze Ioanna Constantiou

Competition Laws, Ownership and Corporate Social Responsibility

Competition Laws, Ownership and Corporate Social Responsibility

Wenzhi Ding

The University of Hong Kong - Faculty of Business and Economics

Ross Levine

University of California, Berkeley - Haas School of Business; National Bureau of Economic Research (NBER)

Chen Lin

The University of Hong Kong - Faculty of Business and Economics

Wensi Xie

The Chinese University of Hong Kong (CUHK) - CUHK Business School

Abstract

Theory offers differing perspectives and predictions about the impact of product market competition on corporate social responsibility (CSR). Using firm-level data on CSR from 2002 through 2015 and panel data on competition laws in 48 countries, we discover that intensifying competition induces firms to increase CSR activities as a strategy for strengthening relationships with workers, suppliers, and customers. The CSR-enhancing effects of competition depend on corporate ownership, with smaller effects among block-holders with shorter horizons (e.g., hedge funds) and among family-controlled firms. Furthermore, the competition-CSR effect is stronger (a) among less financially constrained firms that are better positioned to boost CSR activities and (b) in economies where social norms prioritize CSR activities, as this is where the relationship building effect of CSR are likely to be the greatest.

The impact of EU cartel policy reforms on the timing of settlements in private follow-on damages disputes—an empirical assessment of cases from 2001 to 2015

The impact of EU cartel policy reforms on the timing of settlements in private follow-on damages disputes—an empirical assessment of cases from 2001 to 2015

Hans W Friederiszick, Linda Gratz, Michael Rauber 

 

Abstract

Private cartel damages litigation is on the rise in Europe since early 2000. This development has been initiated by the European courts and was supported by various policy initiatives of the European Commission, which found its culmination in the implementation of the EU Directive on Antitrust Damages end of 2016. This article explores the impact of this reform process on effective compensation of damaged parties of cartel infringements. For that purpose, we analyse all European cartel cases with a decision date between 2001 and 2015, for which we analyse litigation activity and speed. Overall, we find a substantial reduction of the time until the first settlement (increase in litigation speed) together with a persisting high share of cases being litigated (high litigation activity). This supports the view that the reform not only increased the claimant’s expectation about the amount of damages being awarded but also resulted in an alignment in the expectations of claimants and defendants in the final damages amount, ie the European Commission succeeded in reaching its objective to clarify and harmonize legal concepts across Europe.

Acting Principal Deputy Assistant Attorney General Michael Murray Delivers Remarks to the Honorable Lee Yeakel IP Inn of Court Washington, DC ~ Thursday, December 17, 2020

See here.

Search and Information Frictions on Global E-Commerce Platforms: Evidence from AliExpress

Search and Information Frictions on Global E-Commerce Platforms: Evidence from AliExpress

Jie Bai, Maggie Chen, Jin Liu & Daniel Yi Xu

Global e-commerce platforms present new export opportunities for small and medium-sized enterprises in developing countries by significantly lowering the entry barriers of exporting. However, the lack of market selection can lead to a large number of online firms competing for consumers’ attention, resulting in severe congestion in consumers’ search process. When firms’ intrinsic quality is not perfectly observed, these search frictions can further slow down the resolution of the information problem and hinder market allocation towards better firms. In this paper, we investigate how search and information frictions shape firm dynamics and market evolution in global e-commerce. Using detailed data from AliEpxress as well as a rich set of self-collected objective quality measures, we provide stylized facts that are consistent with the presence of search and information frictions. Moreover, using a randomized experiment that offers exogenous demand and information shocks to small prospective exporters, we establish that firms with larger past sales have an advantage in overcoming the search friction and generating future orders. This indicates that initial demand shocks could confound firms’ true quality in determining firm growth and the long-run market structure. We construct and estimate an empirical model of the online market that are consistent with our descriptive and experimental findings and use the model to quantify the extent of demand-side frictions. Counterfactual analyses show that alleviating information frictions and reducing the number of firms can help to improve allocative efficiency and raise consumer welfare.

The Legal Status of Pay-for-Delay Agreements in EU Competition Law: Generics (Paroxetine)

The Legal Status of Pay-for-Delay Agreements in EU Competition Law: Generics (Paroxetine)

Pablo Ibáñez Colomo

London School of Economics - Law Department

Abstract

This case note presents the ruling of the Court of Justice in Generics (Paroxetine) and considers its implications for Articles 101 and 102 TFEU. It is submitted, first, that the approach to the assessment of pay-for-delay agreements enshrined in the judgment can effectively minimise the risk of Type I and Type II errors. Second, the Court does not depart from the long-standing principle whereby EU law does not question the existence of intellectual property rights, but only their exercise.

The judgment, together with Budapest Bank, has important implications for the assessment of restrictions by object under Article 101(1) TFEU. Generics (Paroxetine) confirms that the evaluation of the object of an agreement is a case-by-case, context-specific inquiry. In addition, it notes that the pro-competitive aspects of an agreement may, as factors pertaining to the relevant economic and legal context, be considered as part of the said evaluation. In the same vein (and as confirmed in Budapest Bank), the conditions of competition that would have prevailed absent the practice may also play a role.

As far as Article 102 TFEU is concerned, finally, the judgment confirms that anticompetitive effects within the meaning of that provision only exist where a practice has an impact that goes beyond the limitation of the freedom of action of individual undertakings. In this sense, it seems necessary to consider the cumulative effects of individual agreements by reference to the market as a whole. This approach is consistent with Post Danmark II and Intel, both of which signalled the importance of the coverage of the practice.

Competition Law Sanctions in Germany

Competition Law Sanctions in Germany

 

Carsten Koenig

University of Cologne

Fernanda Luisa Bremenkamp

University of Cologne - Faculty of Law

Abstract

The book chapter discusses competition law enforcement in Germany with a particular focus on sanctions. It describes the types of sanctions that are available under German competition law, classified into administrative, quasi-criminal ("regulatory"), criminal and civil law sanctions. The chapter further explains the applicable rules and procedures, including appeals procedures. Particular attention is paid to the differences that arise in relation to different addressees (e.g. undertakings, associations of undertakings, individuals, parent companies, legal and economic successors). The chapter also discusses recent developments, including the 10th Amendment to the German Competition Act (also known as the Digitization Amendment) and the new German Law on Corporate Sanctions (Verbandsanktionengesetz).

Big Tech and Antitrust: A Path Forward With so much uncertainty, let’s embrace a policy agenda that is premised on curiosity

Many op-eds are not really interesting.  This one is.  It is written by Matt Perault of Duke.

Eighth Night of Channukah - Antitrust Present (bonus version - we are counting the shamash)

There is the ninth branch of the Chanukkiah with the helper candle - the Shamash.  It doesn't count as a separate night but I think that we should recognize the Shamash - a pro-competitive JV.  This year I get that honor. Daniel Sokol (University of Florida) offers his favorite antitrust case.

Brunswick Corp. v. Pueblo Bowl-O-Mat, Inc., 429 U.S. 477 (1977)

In this 9-0 opinion for the Supreme Court, Thurgood Marshall, brought the revolution of economic effects to the procedural side of antitrust.  In the case, Pueblo Bowl-O-Mat sued Brunswick under the Clayton Act.  As a competitor, Pueblo Bowl-O-Mat would have benefitted but not consumers.  Indeed, competition increased!  The Supreme Court correctly explained that the challenged conduct in an antitrust claim must reduce competition.  Second, there must be proximate causation for the plaintiff’s injury by the antitrust conduct. 

Happy Channukah 2020!

 

Eighth Night of Channukah - Antitrust Present

Martha Samuelson (Analysis Group) shares her favorite antitrust case(s) for the eighth night of Channukah.

I think the most impactful antitrust cases have been the set of Microsoft cases that began with the DOJ trial in 1998, over two decades ago.   Key concepts that were identified in those cases and in then contemporaneous academic scholarship included network effects, two-sided markets, the competitive implications of exploiting unique assets of a leading firm (then, interoperability; now, data), and the competitive implications of creating huge value for consumers that might make entry more challenging.  Those cases and that research framed how we thought about technology firms then, and will continue to be central during the current heightened examination by regulators across the world of our most successful technology firms.

 

Standard of Foreclosure under Article 102 TFEU and the Digital Economy

Standard of Foreclosure under Article 102 TFEU and the Digital Economy

Renato Nazzini

King's College London - The Dickson Poon School of Law

Abstract

In this article, the author examines the standard of foreclosure that the European Commission applied in Google Shopping (Search) and Google Android and concludes that the standard of foreclosure is mere capability to foreclose. The only exception is the revenue-sharing abuse in Google Android, where the Commission adopted a standard of capability to foreclose as efficient competitors. These tests are subjected to scrutiny in light of the case law of the Union Courts on Article 102 TFEU from a doctrinal and policy perspective. The author argues that, under EU law, two standards of foreclosure may apply: capability of foreclose and likelihood of foreclosure of as efficient competitors causing negative effects on price, output, quality, or innovation. The capability standard should apply to ‘naked’ abuses, that is, conduct that clearly falls outside competition on the merits because it has the sole purpose of restricting competition and no plausible efficiency rationale, such as predatory prices when prices are below average variable costs or average incremental costs or certain abuses consisting in making false representations to public authorities. The standard of foreclosure of as efficient competitors causing negative effects on price, output, quality, or innovation should apply to all types of conduct that could be anti-competitive but also consistent with competition on the merits, such as tying, conditional rebates or payments, and self-preferencing. Both the Intel and Post Danmark I cases strongly support this conclusion when they establish that the purpose of Article 102 TFEU is not to protect competitors that are not as valued by consumers in terms of price, output, quality, and innovation as the dominant undertaking.